What to do About Japan's Rising Land Prices

Edward J. Dodson

[A letter printed in Business Month, October 1988]

In his report from Japan ("Around the World," July/August), James Fallows pinpoints land prices as the primary problem facing Japanese society, while noting that these prices occur because "much of [the land] is artificially kept out of use." He suggests that the Japanese need to "stop subsidizing farmers [and] start taxing unused land."

Mr. Fallows has touched on the most sensitive arena of privilege not only in Japan but in all the industrialized democracies. Questions concerning private control over land and natural resources continue to haunt our sociopolitical systems and have serious economic consequences.

Taxing unused land at a rate that approaches its true potential economic rent, without regard to how the land is used, will improve the situation. As any good economist will tell you, higher tax rates will tend to drive down the selling price of land.

The United States can use a dose of the same medicine. Land costs have driven the median price of housing above $120,000 and out of reach for an increasing number of families. As more and more of a family's disposable income is taken by the fixed expense of a housing payment, the inevitable impact on the economy is a loss of purchasing power - for housing and for everything else.